How to Justify Higher Pricing

Last week I bought my 16 year old son his first car. I made him do the online shopping, and I told him the car had to be within a certain price range and have all wheel drive. He did his shopping, and I drove him to the dealership.

As we began to discuss the price with the salesperson, he pulled up a website. The website had the prices of every model like the one we were interested in for the surrounding 100 miles ranked by distance and price. His choice was the 6th lowest price on the list of about 30 similar cars. One of the less expensive cars was on the lot, but it was a bare bones model. The others had higher mileage, and the prices were not that much lower.

I wasn’t haggling with the young sales guy over the price. I was haggling with him over the certified warranty. The young sales dude said, “If we certified that car, we’d have to raise the price. Then people would go to these other dealers. That’s why it’s not certified.”

Then our young sales dude proceeded to try to sell me a warranty package for about $3,500. I informed him that I wasn’t interested by collecting my belongings to leave. The young sales guy said, “Wait. What can I do to earn your business?” (Don’t you just love that?) I said, “You can certify the car and give me the warranty. Why don’t you go and find out why it wasn’t certified or what it would take to do so?” He thought that was a good idea.

Young sales dude came back with the papers. The car had already been certified. It cost a little more to buy the car certified, but nothing even close to the warranty he tried to sell me. He swung, and he missed (all on his manager’s direction, the manager cleverly hidden and directing his young minion to do his bidding).

But this isn’t about the tactics that auto dealers are still using. This is about price and value.

Higher Prices

What if there was a website that showed your price against all of your competitors, all listed from lowest to highest? Would it matter to you where you showed up on that list?

Rule: People are willing to pay more, but you have to help them justify the higher price.

In this case I was willing to pay more for a warranty from the dealership who sold this model, because I wanted the certainty of knowing the major issues are covered. Had I left this dealer, I’d have gone to another Nissan dealer to pay more for a car with the warranty I wanted. I would not have gone to one of the cheaper dealers on the website the salesperson showed me.

More Value

Value is in the eye of the beholder. The salesperson showed me he was one of the cheapest choices available to me. He believed that’s what I wanted because he believes that’s what everyone wants. For me the value was certainty. I wanted a single owner, the carfax report, and a factory warranty.

Your higher price needs to be about the value it creates for the buyer. What do your buyers receive in the way of value for the premium you charge over your competitors?

If you do not intend to sell price, make a list of what you to do to create greater value and the language you use to describe that value. You are responsible for describing the increased value to your buyers. You are also responsible for understanding what it is they value.